The State Administration of Taxation of China has issued guidance according to which oil and gas companies engaging in coalbed methane and shale gas production—or providing production services for coalbed methane and shale gas production are subject to value added tax (VAT) with respect to their production services.
Oil and gas companies engaged in coalbed methane and shale gas production or provide productive services for the development of unconventional gas are subject to a VAT rate of 17% from 1st July 2013, which is consistent with the VAT treatment for oil and natural gas projects.
If the production services associated with coalbed methane and shale gas production are subject to the VAT pilot program, they will be subject to VAT at a lower rate of 6%.
